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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]
ORDER Per Shri Mahavir Singh, JM:
This appeal by revenue is arising out of order of CIT(A)-XXXII, Kolkata in Appeal No. 112/CIT(A)-XXXII/09-10/Cir-50/Kol dated 20.01.2011. Assessment was framed by DCIT, Circle-50, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2007-08 vide its order dated 31.12.2009.
Brief but common facts relating to all the issues raised by revenue are that the assessee is engaged in the manufacturing and trading of jewellery. A survey u/s 133A of the Act was carried out by revenue on the business premises of the assessee on 12.09.2006. During the course of survey certain registers, loose bunch of documents were found and inventorised as MS1 to MS 20. During the course of survey no books of account were made available to the survey party of the department.
3. The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition of Rs. 12,88,301/- made by AO on account of unexplained expenditure found recorded in MS-3 impounded document. For this revenue has raised the following ground no.1:- “Ground No.1: That Ld CIT(A) has erred in law as well as facts in deleting the addition of Rs 12, 88, 301/- was made as unexplained expenditure on the basis of vouchers at MS- 3.”
4. Briefly stated the facts of the case are that revenue during the course of survey found certain documents, loose papers, register etc., which were inventorised as annexure MS-l to MS-20 and were impounded. But no books of account were found during survey from the business premises of the assessee and the same were produced
Maya Sirkar AY 2007-08 during the course of assessment proceedings which were considered and examined by the A.O. while completing the assessment. The AO did not consider the books of account and proceeded to assess the income of the assessee on the basis of impounded document MS-3, which is a bunch of loose papers containing pages 1-322 out of which are 136 debit vouchers without any date. According to AO a sum of Rs.12,88,301/- being labour expenses paid to labourers. The assessee explained that these are signed labour vouchers pertaining to F.Y. 2003-04, 2004-05 and 2005-06 and these vouchers were filed by accountant who did mischief by leaving the blank portion of the voucher, but according to him there is no discrepancy in the accounts. But, the A.O. has not accepted the explanation of the assessee and noted that these being undated vouchers and hence, he was of the view that these relates to F.Y. 2006-07 relevant to this assessment year 2007-2008. Accordingly, the A.O. treated the sum of Rs.12,88,301/- as unexplained expenditure and added back to the total income of the assessee. Aggrieved, assessee preferred appeal before CIT(A).
The C.I.T.(A) deleted the disallowance of expenses by observing in para 7 as under :- 7. The first ground in appeal relates to the addition of Rs.l2,88,301/-. In the course of survey 136 debit vouchers were found without any date, which were impounded marked as loose bunch annexure MS-3. From the impounded loose papers bunched as annexure MS-3 of the impounded material, the A.O. observed that out of 322 debit vouchers bunched therein, 136 vouchers were undated. According to the A.O. the undated vouchers were not found reflected in the books of account of the assessee for the relevant year and since the assessee could not substantiate that those undated vouchers were incorporated in the accounts of any earlier year, he treated those vouchers to be related to the previous year relevant to the assessment year under consideration and added the amount reflected in those debit vouchers to the income of the assessee for the year under consideration as unexplained expenditure. Accordingly, the A.O. made an addition of Rs.12,88,301/- to the assessee's income. The assessee submitted that the cash book and ledger for the relevant year was produced before the AO along with detailed statement showing the payment of exact amount mentioned in each of the voucher along with the relevant cash book page numbers and date of payment covering an amount of Rs. 10,71,399/-. A letter was filed on 27.4.2009 along with the list of 136 vouchers identified by the A.O. relating to the year under consideration wherein the payment of Rs. 10,71,399/- was reflected with dates and cash book page for this year. It was further submitted that the AO has made mistake while making the table in the assessment order. In respect of one of the vouchers at serial no. 223, the amount in voucher was Rs.8,500/- and not Rs.85,000/-. In respect of the remaining vouchers for Rs.1,40,402/- it was submitted that no entry could be found in the cash book for the assessment year in question as well as in earlier years but the assessee has admitted sales outside the books to the extent of Rs.16,89,000/-. It was submitted that the AO has estimated profit of Rs.2,48,048/- on such sales which is not disputed. The AO, therefore, in the process has allowed unrecorded expenses of Rs. 14,41,952/-(16,89,000 - 2,48,048). The said mount of Rs. 1,40,402/-, therefore, cannot be added since the amount was outgoing from above unrecorded sales. (1071399/- +140402/- + 76500/= 12883011-).
Maya Sirkar AY 2007-08 The paper book submitted by the assessee was sent to the AO for his comments. The AO in the remand report reiterated the points mentioned in the assessment order. I have considered the assessment order, submissions made by the assessee, the remand report, rejoinder to the remand report and relevant papers filed before me. I find that the assessee submitted detailed statement for the payments mentioned in the undated vouchers with page numbers of the cash book and the date on which such expenses were incorporated in the cash book. I find that the cash book for the current assessment year was produced before the AO and the same was examined by him. Not only that, the assessee's claim that some of the expenses were related to the earlier year was also examined by the AO in the assessment for assessment year 2006-07 as is evident from the assessment order for the assessment year 2006-07 wherein also the cash book was examined. Even in his remand report the AO has not been able to point out any discrepancy in the assessee's submissions. The AO has also not disputed the mistake in respect of voucher number 223 pointed out by the assessee. In so far as the remaining sum of Rs. l ,40,402/- not found incorporated in the , I find that the AO himself has found unrecorded sales of Rs.16,89,000/- and has estimated a net profit of Rs.2,48,048/- thereby holding the sum of Rs.14,41,452/- as unrecorded expenses. The AO in his remand report also has not contradicted the submissions of the assessee. The unrecorded expenses to the extent of Rs.l4,41,952/-, which includes Rs.l,40,402/-, therefore, by implication were met out of the receipts on account of unrecorded sales. The addition of Rs.l2,88,301/- is, therefore, deleted. Accordingly, this ground is allowed. Aggrieved, against the order of the C.I.T.(A), revenue is in second appeal before Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. Before us assessee contended that it is maintaining regular books of accounts including stock registers which was produced in the course of hearing of before A.O., but no defect has been pointed out in the books of account. We find that a survey was conducted at the business premises of the assessee on 12.9.2006. During the course of survey various papers, registers, documents and loose bunches of sheets were inventorised and impounded by the AO. In the course of assessment proceedings the AO called for certain clarifications and explanations and the same were complied with. The assessee before the AO produced the cash book and ledger for the relevant year. A copy of the ledger account of labour payments cash book was also produced. A statement prepared from the said ledger account is also filed. We found from the argument of assessee that the AO made a mistake while making tabulation in respect of one of the vouchers out of 136 vouchers. At SI page 223 the amount should be Rs. 8,500/- instead of Rs. 85,000/-. The total will thus come down to Rs. 12,11,301/- in place of Rs.12,88,301/-. We find that the assessee before AO as well as before CIT(A) also claimed that all these vouchers have been entered in the regular cash book except some payments aggregating Rs.1,40,402/-. All the Maya Sirkar AY 2007-08 payments were duly entered into in the regular books of accounts except the said sum of Rs.1,40,402/- as is evident from the details prepared and filed before the lower authorities and also before tribunal. The accounts of the assessee are audited accounts and the entries in respect of the 136 vouchers mentioned by the AO (except Rs.1,40,402/-) appear in the regular cash book in the same name and in respect of the same amount. Therefore the sum of Rs. 1071399/- is duly recorded in the books of accounts. We find that the AO has made the addition under misconception in respect to this amount Rs.10,71,399/-. Even otherwise, the matter was referred to AO for remand report, who refused to go into the books of account and observed as under:- “During the course of survey number of vouchers in respect of expenditure were impounded but without any date but the A.R could not substantiate that 136 no. of undated vouchers were incorporated in the accounts of any earlier years. As the amount are not recorded in the books of a/c's produced during the course of hearing are held to be unexplained expenditure. The A.R. also admitted in his letter that there was no such date on the vouchers. Regarding expenditure of Rs. 5,25,431/-, 5,148/-,1,30,651/- & 2,55,705/-: As per impounded books marked MS-16 the A.R of the assessee could not co-relate a single expenses. As the expenses are found not recorded in the books of A/c's it is treated as unexplained expenditure. Rs. 5,148/-: This is labour expenses which is not recorded in the books of A/c's. Rs. 1,30,651/-:- This is undisclosed payment on account of labour charges as the assessee failed to produce any evidence in this respect. Rs. 2,55,705/-:- As per impounded document marked MS-13 page 40 the expenditure was incurred for different gift items. As the expenditure are not found in the books of A/c's the same is added back to the as unexplained expenditure.” We find that regarding undated vouchers found in the course of survey containing in all expenses of Rs. 12,88,301/-, the AO has reiterated whatever was mentioned in the assessment order. The AO repeated that since there was no date in the vouchers and the amount was not recorded in the current year's accounts the same was rightly added. Firstly there was a totaling mistake of Rs. 76500/- (Rs. 8500/- taken as Rs. 85000/-), which is not disputed by the AO in the remand report. The AO has not disputed the claim of the assessee that out of the total of Rs. 12,11,301/- (after correcting the totaling mistake) the vouchers for a sum of Rs. 10,71,599/- were duly recorded in the earlier year's books for which specified amount wise details were filed before the AO in course of assessment proceedings and have not been adversely commented by the AO even in the assessment order. Therefore simply because there was no date on the vouchers but Maya Sirkar AY 2007-08 specific amount was found debited in the earlier year's cash book and there was no evidence to suggest that these expenses related to this year, the addition was not justified Hence, we confirm the order of CIT(A) deleting this addition.
With regard to the disallowance of certain expenses from the impounded papers amounting to Rs. 10,71,399/- (Rs. 5,25,431+ 5,148+ 1,30,651+ 2,55,705), that the same have been correlated by the assessee in the written submissions with the unrecorded sales of Rs. 16,89,700/- on which the Ld AO himself has estimated the profit of Rs.2,40,048/- thereby allowing the expenses of Rs. 14,40,652/-. Such expenses in fact have been found in the course of survey being the above sum of Rs. 10,57,536/- as well as the sum of Rs.1,40,402/- and given in para-10. The AO in the remand report has reiterated his views taken in the Asstt. Order and has not disputed the claim of the assessee correlating these expenses with reference to the unrecorded sales. Therefore, we are of the view that CIT(A) has rightly correlated this addition with the profit of Rs.2,40,048/- and we confirm the order of CIT(A) on this issue.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition of Rs. 9,16,935/- made by AO on account of unexplained expenditure not recorded in the books of account but reflecting in the impounded papers. For this revenue has raised the following ground no.2:- “Ground No.2: That Ld CIT(A) has erred in law as well as facts in deleting the addition of Rs 5,25,431/-, Rs5148/-, Rs.1,30,651/-, and Rs.2,55,705/- aggregating in all Rs. 9,16,935/- which were made on the grounds that they are not the expenses in the books of accounts.”
9. Brief facts are that the AO added back Rs. 5,25,430/- Rs. 5,148/- , Rs. 1,30,654/- and Rs. 2,55,705/- as unexplained expenses vide seized papers on the ground that certain payments for expenditures have been made which were not found recorded in the books of accounts. Another addition of Rs. 1,40,502/- being labour payments vide MS-3 as mentioned in para-6 and 10 was also not found recorded in the books of accounts, total addition comes to Rs. 1057336/-. Aggrieved, assessee preferred appeal before CIT(A).
10. The CIT(A) deleted the addition by observing in para 8 of the order as under:- “8. The second ground relates to the addition of unrecorded expenditure of Rs.5,25,4311-, Rs.5,148/- Rs.1,30,651/- and Rs.2,55,705/- aggregating in all Rs.9,16,935/-. From examination of the material impounded during the survey found that some of the documents contained notings about the expenses incurred by the assessee which as per annexure MS-5 were Rs. 5,25,430/-, as per annexure MS-6 Rs.5,148/-, as per annexure MS-12 Rs.l ,30,651/- and as per annexure MS-13- Maya Sirkar AY 2007-08 Rs.2,55,705/-. In view of my findings above, in the preceding paras, that unrecorded expenses to the extent of Rs.14,41,952/- by implication comes out of unrecorded sale proceeds of Rs. 16,89,000/-. Moreover I find the description in MS-5 is Ring, Jhumka, Necklace etc and in MS-12 (unrecorded sales) also the description is Ring, Jhumka, Chain, etc. which proves that the unrecorded sales were of the unrecorded purchases, therefore, both cannot be added. Since the unrecorded purchase has already been dealt with in preceding para, no addition on that account can be made. In view of above, the addition of Rs. 9,16,935/- is deleted. Thus, this ground is allowed.” Aggrieved, against the order of CIT(A), revenue came in second appeal before Tribunal.
We have heard rival submissions and gone through facts and circumstances of the case. The assessee is in the business of selling of jewellery. The modus operand of the assessee’s business is that apart from its own sale of jewellery, the small gold smiths who also manufactures some jewellery on their own from the small portion of gold retained by them in course of labour work, also gives their jewellery for sale to the assessee. The assessee keeps the said jewellery in the show room and sales the same to the customers and on sale the payment is made thereafter to the gold smiths. This will be apparent from the seized paper MS-5 wherein the payment for small items of jewellery is made to such gold smiths. The assessee has already admitted the sale of jewellery amounting to Rs.16,89,700/- outside the books and on the said undisclosed sale the AO has already estimated net profit at 14.68%. We find from records that in course of survey the AO found that some of the purchased jewellery as well as the labour charges were not accounted for, as mentioned above, which is not accounted for. AO himself has presumed outgoings for such sale (Rs.16,89,700- Rs.2,40,048) at 14,41,652/-. The AO has found in the impounded papers the payment amounting to Rs. 10,57,336/-, which is much less than the outgoing estimated by the AO on such sales. Therefore these outgoings can be telescoped with the actual expenses accepted by department to have been incurred for achieving the undisclosed sales of Rs. 16,89,700/-. Accordingly, CIT(A) has rightly deleted the addition and we confirm the same.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of unexplained investment. For this revenue has raised following ground no.3: “Ground No.
3. That Ld. CIT(A) has erred in law as well as in facts in deleting addition of Rs.7,45,959/- which was made as unexplained investment.”
Brief facts leading to the above issue are that the AO during the course of assessment proceedings noticed from impounded document MS-10 that pages
Maya Sirkar AY 2007-08 containing 9 -28 contained the details of silver jewellery/utensils manufactured by Karigars pertaining to this FY 2006-07 relevant to AY 2007-08. The AO brought out the details in assessment order that the quantity manufactured is at 40.284 kgs. Of silver jewellery, the value of which is at Rs.7,45,949/-, found not recorded in the books of account. He accordingly, made addition of this amount as undisclosed investment. Aggrieved assessee preferred appeal before CIT(A), who after considering the submissions of the assessee and remand report of the AO deleted the addition by observing in para 9.3 as under: “9.3. I have considered the assessment order, submissions made by the assessee, the remand report and rejoinder to the remand report and the relevant papers filed before me. I examined the relevant impounded papers and found that the AO has not appreciated the facts correctly. The notings of the figures of 5280/-, 503/- 800/- 1200/- and 910/- on Page 9 of MS-10 clearly show that the same were on account of (Majuri) labour charges. Similarly, page 12 of the same annexure shows the calculation of labour charges, similar is the position in respect of page 11, 10, 22, 23 and other pages as detailed by the assessee. It is also observed from the assessee's audited accounts that the manufacturing, purchase and sale of silver ornaments etc. were much more than what is recorded in the impounded papers. In view of the above facts I do not find the addition made by the AO to be justified. Therefore, the addition of Rs.7,45,959/- is deleted. This ground is, hence, allowed.”
Aggrieved against the order of CIT(A), revenue came in second appeal before Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. Regarding expenditure of Rs. 7,45,959/- the AO during remand proceedings observed that on verification of impounded books of accounts as per ID Marks MS-10, it is seen from handwritten loose sheets from Page 10 to Page 23 that these pages are handwritten loose sheets. In these loose sheets there were some descriptions written in left side and in weight/grams written on the right side of the pages. But, nowhere it was written labour charge paid/receipt except Serial No.24 & 19. The total weight comes to 40283.730 grams and its value comes to Rs.7,45,959 (100+605). In Page No.24, there was written that amount paid to Ajoy Sing 605.00 as it is seen from the Ledger page of Ajay Sing. The contention of the assessee that A.O. mixed up the weight in terms of gram and amount in terms of money is not at all correct as those pages i.e. Page 10 to Page 24 are all written in terms of weight nowhere it is written as labour charges except Rs.605 as per Sl.No.24 and Rs.100/- as per Sl.No.19 which is amount paid are clearly mentioned. In Page 9 of Ledger Page of Ajoy Singh it is written at the top of the page as 'Rupees'. Hence, it appears that the figures are 5280+503+800+ 1200+9l0 = Rs.7693 are Maya Sirkar AY 2007-08 labour charges in terms of money instead of weight in grams. Hence, total weight comes to 40283.730 - 7693.000 = 32590.730 undisclosed investment which comes to Rs.6,02,928/- is required added back to the total income. The addition was made on account of undisclosed investment of Rs.7,45,959/- which is the value of 40,283.730 gram. On going through the impounded books of accounts, it appears that there was a mistake in assessment order only 7693.00 grams. Hence, Rs.6,02,928/- is required to be added with the total income instead of Rs.7,45,959/- as undisclosed investment. In view of the above the AO rejected the claim of assessee since there was no hooks of accounts were found in business premises during the course of survey operation and in spite of opportunity provided during the day of survey no books of accounts were produced. The contention of the assessee is based on his document/paper but the same was not found during the course of survey at the business premises. But we find that while making the tabulation in the assessment order, the AO has mixed up the amount in terms of money and the weight in terms of grams and therefore, confusion has arisen. In all there are 27 items. The assessee has filed complete details of all the 27 items segregating the items in terms of the money i.e Rupees and in terms of grams from the seized papers. We find that the payment to the labour is 23636.50 and the total weight of silver involved was 8753.63 grms and from accounts of the assessee that the total silver manufactured during the year was 26915.64 gms. and the labour charges for manufacturing silver was 2,87,010, 54,570/- and Rs.8,555/-. Therefore the total silver manufactured during the year as well as the labour charges incurred was much more than what the AO found in the impounded papers. In fact the entire confusion has arisen because of the mistaken belief of recording the figures in terms the money as well as grams as if the same was weight of the silver dealt with. In view of the above facts and circumstances of the case, we are of the view that CIT(A) has rightly deleted this addition and we confirm the same.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of unexplained investment made in excess stock at Rs.7,97,234/-. For this, revenue has raised following ground no.4: “Ground No.
4. That Ld. CIT(A) has erred in law as well as facts in deleting addition of Rs.7,97,234/- which was made as excess stock considered as unexplained investment.”
Maya Sirkar AY 2007-08 16. Brief facts leading to the above issue are that the AO during the course of assessment proceedings noticed from the impounded documents MS-4 that there is excess stock in respect to 22 carats Gold, 18 carats gold and silver ornaments and the differential value is at Rs.7,97,234/-. The AO brought out the difference in a chart which is reproduced from assessment order as under: Items Disclosed by Firm Found by survey Excess total (in Values (in gram) Team (In gram) gram) 22ct gold 20819.210 20409.030 410.180 Rs.3769955.42 @919/- per gm 20 ct gold 140.00 140.00 - 18ct gold 1569.422 1562.904 6.518 Rs.5449/- @ 836/- per gm Silver Ornaments 64423.287 42000 Rs.4,14,830/- @ 22423.287 18500 per kg. Total Rs.7,97,234/-”
According to AO, the assessee could not explain the additional stock/excess stock found during the course of survey and accordingly, he added the same undisclosed investment at Rs.7,97,234/-.
Aggrieved, assessee preferred appeal before CIT(A), who after considering the submissions of the assessee and remand report of the AO deleted the addition by observing in para 10.3 as under: “10.3. I have considered the assessment order and the submissions of the A.R. as well as the remand report of the A.O. and the rejoinder of the A.R. I find myself in agreement with the A.R. that if there was higher figure of recorded stock than what was found in the course of survey such excess recorded in the books cannot be treated as undisclosed investment in the hands of the assessee. The addition of Rs.7,97,234/- is, therefore, deleted. This ground is, hence, allowed.”
Aggrieved against the order of CIT(A), revenue came in second appeal before Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. We find that the AO has added back Rs. 797234/- as undisclosed investment of the assessee in the stock of jewellery. The AO found that as per the books of accounts and records of the assessee the stock of the jewellery and silver ornaments were higher than the stock found in course of survey. The AO, therefore, treated the excess found as per books of accounts as undisclosed investment. Even during remand proceedings the AO observed that the assessee disclosed higher side Jewellery found than during the course of Survey. It is also mentioned earlier that during the course of Survey no cash book, Maya Sirkar AY 2007-08 ledger, account, etc. was found and the assessee stated that the same was lying with Accountant for Audit purpose. But she failed to disclose name of the Accountant during the course of deposition. It appears that this action of the assessee is intentional for the purpose of avoiding enquiry. As there was no book of accounts found during the course of survey, the purchase recorded as claimed by the assessee is not accepted and the same was added back as excess stock. But we find that the assessee reconciled the excess stock with that the books of account and the reconciliation submitted by the assessee, the assessee had excess stock of jewellery recorded in its books of account as compared to the physical stock found at the time of survey. We find that once the AO had accepted the stock as per books reconciled by the assessee. No deficiency or mistake is found or pointed out in the said reconciliation then AO cannot make any addition on this account. If the books of account show higher figure of stock then what was found in the course of survey, such excess cannot be added as undisclosed investment. Accordingly, this addition has rightly been deleted by CIT(A) and we confirm the same.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of customers’ gold lying in stock treating the same as unexplained investment. For this, revenue has raised following ground no.5: “Ground No.
5. That Ld. CIT(A) has erred in law as well as facts in deleting addition of Rs.51,53,238/- which was made stated by customers gold as unexplained investment.”
Brief facts leading the above issue are that the AO during the course of assessment proceedings noticed from impounded document MS-20 that the claim of assessee regarding customers’ gold is not proved because many of the persons have denied giving any gold to assessee. Therefore, the AO treated the customers’ gold weighing at 5607.441 grams as undisclosed stock and thereby added the same as unexplained investment to the tune of Rs.51,53,238/-. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) after considering the submissions of the assessee and the remand report of the AO deleted the addition vide para 11 of his order. The relevant findings of para 11 of CIT(A)’s order is being reproduced as under: “I have considered the assessment order, submissions made by the assessee, the remand report and rejoinder to the remand report and the relevant papers filed before me. With regard to the admission of the AIR as stated by the AO, the A/R stated that the order sheet notings on 29.12.2008 may be referred to which are as under:
"The AR was also given the details of replies received from different parties against verification letter issued to them. The AR submitted as he has already admitted the discrepancy to the extent of entries no further action is warranted" . The above noting was verified from the assessment records which were called for from the AO. In my opinion there is no such admission for making any addition as stated by the AO. I also find from the replies sent by customers that there is no denial of purchase made from the assessee. The stereotyped letters sent by 5 persons were as under: "This is to inform you that I had a transaction with M. Sirkar and Sons during the period 1.4.2006 to 31.3.2007. I could not find the document regarding the transaction due to the long time period in which the transaction was made. Due to this reason I am unable to produce the documents after such a long time. “I hereby confirm that there was a transaction with M. Sirkar & Sons during this period. I apologies for the missing document" The replies sent by Ms. Amita Saha, Sh. A.K. Prasad and Sh. A.K. Bhadra to the A.O. are also reproduced hereunder: Reply of Sh. A.K. Prasad "To D.C.I.T., Circle -50 Office of the Dy Commissioner of Income Tax, Circle - 50, 169, AJC Bose Road, Bamboovilla, Kolkata 700014. Dear Sirs, Ref: Your letter No. DCIT. Cir-50/Scrutiny/2009-10/Kol./1205 dtd 07.12.2009 Sub: Calling information U/S 133 (61 in case of Smt Maya Sirkar of AE-335, Salt Lake City. Kolkata 700064 for A.Y 2007-08 (F.Y. 2006-07) With reference to your above mentioned letter, I hereby state that the person, Smt Maya Sirkar is not known to me and I have not entered into any transaction with her for A. Y 2007-08 (FY 2006-07). However, on visiting the address provided in your letter (AE-335, Salt Lake City), I found that a shop, M B Sirkar & Sons, exists at the said address. 1 normally do not have much purchases made from this shop. In the FY 2006-07, I would have purchased items in the range of Rs. 18,000 to 20,000 in the entire FY from this shop . Unfortunately, I am not able to locate the purchase bills and therefore am not in a position to furnish the documentary evidence in support of my submission, The lack of documents is deeply regretted. My PAN number is AAHPP2522K. Thanking you, Yours truly, Sd- A K Prasad CF-282, Salt Lake City Kolkata 700064. " Reply of Sh. A.K. Bhadra
23RD December, 2009 "The Deputy Commissioner of Income Tax Circle-50 Bamboo villa 169, A.J.C.Bose Road Kolkata-700014. Dear Sir, Calling information u/s.133(6) of the LT. Act. In case of Mrs. Maya Sirkar of AE-335. Salt Lake, Kolkata-700 064 (or A. Y.2007-08 (FY-2006-07 I refer to your letter No. DCIT, Cir-50/Scrutiny/2009-1 0/Koll1199 dated 07.12.2009 in connection with the above matter. It may so happened that I may have purchased small item for gift purposes valuing approximately Rs.1000/- or less from her shop in the said financial year but due to gap of a long time, I am unable to recollect the exact position and to find out the papers. I confirm that I have no other financial transactions with the above Assessee or with her shop. My PAN No.is ACXPB9244Q. The inconvenience caused is regretted. Thanking you, Yours faithfully, Sd/- CF-98, Salt Lake City, (Aloke Kumar Bhadra) " Kolkata-700064 Reply of Ms. Amita Saha "The Deputy Commissioner of Income Tax Mrs.Anita Saha Circle-50 AD-17 /5 Salt Lake City Bamboo villa Kolkata-700064. 169, A.J.C.Bose Road Kolkata-7000 14. 15th December 2009 Dear Sir, Your notice u/s.131 dt.8th Dec 2009 Regarding transactions with M/s M Sirkar & Sons, Salt Lake City In response to your above notice I like to inform you that I am a housewife and I do not have any taxable income and I do not have PAN Card also. The earning member of our family is my husband Sri Ahindra Chandra Saha, retired professor of Calcutta University whose PAN No.AKKPS2299B. As regards the transactions with M/s. M Sirkar & Sons I like to mention that a very few purchases were made by us from them during last 3/4 years on different dates the ornaments of small value approximately of Rs.2000/- to Rs.18000/-. At this distance of time I cannot recollect the exact amount and the date of purchases as relevant Cash Memos are not readily available with us.
Maya Sirkar AY 2007-08 I prefer to enclose a Xerox copy of my Voter Card as proof of my Identity for your record. I hope this will serve your purpose. Yours faithfully, Sd/- ( AMITA SAHA ) Encl : As above. " The AO has mentioned in the assessment order that none of the customers admitted to have deposited gold with the assessee. But from the notice u/s 133(6), it appears that the AO did not raise any query in such notices with regard to the deposit of gold, if any, by the customers. From the perusal of the notices U/S 133(6) it is observed that queries were raised as under: "Acting u/s. 133(6) of the Income Tax Act, 1961, you are hereby requested to furnish the following information in writing in respect of the above mentioned assessee.
Details of transactions in cash or otherwise with the above mentioned assessee during the financial year 2006-07 (F.Y. 2007-08) with opening balance and closing balance.
2. Details of balance of cash or otherwise lying with the above mentioned assessee on 12.9.2006.
Detail of payment received/made during the financial year 2006-07.
Please furnish your P.A.No. Please furnish the documentary evidence in support of your submission. I also find that the AO himself has accepted the deposit of gold from the customers, as per the calculations made in para 11 of the assessment order while making the addition of Rs.7,97,234/-. From the working of the undisclosed income of Rs.7,97,234/- "Gold ornaments belonging to customers" of 13,649.831 gms. was claimed by the assessee and that has been considered and accepted as correct by the A.O. while making the addition. I also find that the assessee has disclosed substantial receipts from job charges and such job charges are received every year. In assessment year 2006-07 such receipts were to the extent of Rs. 37,06,337/- Not only that, a separate register (marked annexure MS-20) was also found in the course of survey which proves that the assessee received gold for job working from customers. Furthermore, none of the customers have denied to have purchased ornaments from the assessee. I also find that the AO has partly accepted the explanation of the assessee. Taking into account all these facts there appears to be no justification in making the impugned addition. The addition of Rs.51,53,238/- therefore, stands deleted. This ground is thus, allowed.”
Aggrieved against the order of CIT(A), revenue is in second appeal before Tribunal.
We have heard rival submissions and gone through facts and circumstances of the case. The observation of the AO during ---remand proceedings are that the assessee failed to prove that the excess gold belong to customers. Notices were issued but they denied having any transactions with the assessee which was clearly stated in Assessment order page No.16 and the same was informed to the assessee which it is appeared from order sheet dated 29.12.2009. But on the date of hearing the assessee did not claim any cross examination but to accept discrepancy. Hence, value of gold weighing 5607.441 grams of gold ( 22Ct.) for Rs.51,53,238/- is added back as Maya Sirkar AY 2007-08 unexplained investment. Moreover, the assessee claimed that he had received 83.414 grams of gold from customers on the basis of Rs.50/- per gram as making charges as per Valuer's report. On the basis of Valuer's report on making charges, the weight of the gold arrived is Rs.4I,70,785/- divided by Rs.50/- as making charges, The weight of gold 83.414 grams is the assumption of the assessee but not on the basis of the impounded documents but addition was made on the basis of impounded documents after verification I examination from the customer's gold as claimed by the assessee.”
We find that the AO added back Rs. 5153238/- as the customers gold, which according to AO, was not proved as belong to customers. The AO issued notices to few of customers, some of them accepted having the transaction and some of them denied. The AO asked the assessee to explain the customer's gold and ultimately the AO concluded that the assessee admitted for the addition. We find that the assessee filed the list of the customers from whom gold was received for remaking. We have gone through the order sheet notings dated 29.12.2009. The AO has recorded as under: "The AR was also given the details of replies received from different parties against verification letter issued to them. The AR submitted as he has already admitted the discrepancy to the extent of entries no further action is warranted".
This shows that the AR admitted the discrepancy and no further action was required by which it meant that he did not want to cross examine the parties who has replied in the negative. But there still remained the parties who have confirmed having the transaction with the assessee during the year. Even if some of the parties did not accept but the fact could have been brought out from the records. We noted from the Audited Accounts filed with the return that the assessee has received making charges to the extent of Rs. 4170785/- which means that during the year the assessee has received 83414 gms of gold from the customers for remaking. (The admitted position is that making charges was Rs. 50 per Gm). The AO has not disputed the said receipts and has accepted the assessee's stand that the assessee has received the remaking charges of old jewellery given for remaking by the customers. It is of common knowledge that such remaking takes a month or two and in between such jewellery remains with the assessee. We have also gone through the reconciliation submitted on which the AO has relied on the while making addition of Rs. 797234 vide para 11 of the assessment order while considering the stock discrepancy. The AO has accepted the gold ornaments belonging to customers Maya Sirkar AY 2007-08 at 13649 gms. Having accepted and relied on the said statement he cannot deny the said availability of gold while making another addition. He should have accepted his own finding as recorded in para 11, Page 14. The AO has also accepted the fact that some gold was lying with the job works for making or remaking. The AO cannot reject the explanation partly. Therefore, we are of the view that CIT(A) has rightly deleted the addition and we confirm the order of CIT(A) on this issue.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of difference in valuation treating the same as unexplained investment. For this, revenue has raised following ground no.6: “Ground No.
6. That Ld. CIT(A) has erred in law as well as facts in deleting addition of Rs.39,16,154/- which was made as well as valuation report and unexplained investment.”
Briefly stated facts are that the AO noticed from the page no. 34 of MS-4 and page no. 1 of Ms-19 as well as valuation report at Sl. No. 42 to 51 and 54 to 58 that there is a difference in term of quality, weight and value to the extent of Rs.39,16,154/-. According to AO, as the assessee could not explain the difference nor could reconcile, he treated the difference as undisclosed investment. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) deleted the addition by observing in para 12 of his order. The relevant portion of para 12 reads as under: “I have considered the assessment order, submissions made by the assessee, the remand report and rejoinder to the remand report and the relevant papers filed before me. I find that in page -34 of annexure MS-4 bulk quantity of stones is mentioned but there is no mention of any quality of stones. Similar is the position in page-I of MS-19. The DVO has also calculated the market value of 3050.98 ct of stones at Rs.39,16,154/-. If the gross profit embedded therein is reduced therefrom, the cost price of the stones found comes to about Rs.1000 per ct and the cost price of the stones purchased vide pag34 of MS-4 also comes to about Rs.1000 per ct. I also find from the audited accounts that the assessee had purchased more than 500 gms (equal to 2500cts) of stones during the year and had stock of over 165 gms equal to more than 800 cts. The CBDT in its Press Note dated 11.5.94 has instructed that even during the search and seizure proceedings not to treat the jewellery as unexplained if the weight of the jewellery found tallies with the weight disclosed by the assessee. The assessee has been able to demonstrate the she had sufficient stock of the stones as on the date of survey. In view of the above the addition made by the AO is deleted. This ground is, hence, allowed.”
Aggrieved, revenue is in second appeal before Tribunal. 26. We have heard rival submissions and gone through facts and circumstances of the case. We fond that the AO has added back Rs. 39,16,154/- on the basis of the valuation
Maya Sirkar AY 2007-08 done by the DVO determining the market value of the stones as undisclosed investment. On being asked to explain, the assessee explained that the assessee had with him some opening stock of the stones as well as stones purchased during the year before the date of survey and in particular the purchase of stone of Rs. 25,50,000/- immediately within one month from the date of survey the weight of which was 2578.59 gms. The said amount was also disclosed by the assessee as additional income and added back in the total income. The AO did not accept the assessee's explanation on the ground the assessee could not co-relate the entries of the purchase with the valuation report in respect of quantity, weight or value nor produced any other evidences and reconciled the difference. We have gone through Page-34 of MS-4 and find that certain bulk quantities are mentioned in the said page. There is no mention of any quantity of material. Similarly is the position in respect of page-I of MS-19. It is a fact that the DVO has calculated the market value of 3050.98 gm of stones at Rs. 3916154/-. The GP rate of the assessee during the year is 21.20%. Therefore, even as per the valuer the cost price of this stone will come to 3085146/- which is the value of 3050. 98 grams which comes to about Rs. 1000 per grams. It is also a fact that the value of the stones purchased (2578.50gms) was also about Rs. 1000 per gm. as per seized documents MS4 Page-34. Therefore the cost of the stones found tallied with the cost determined by the DVO which comes to more or less the same. It is also a fact that from the quantity statement with the total stones purchased during the year was 315.704 gms + 2578.59 gms + 53.601 + 133.379 gms the total of this comes to more than the stones found in the course of survey. It may here be mentioned that even the CBDT in its Press Note dated 11.5.94 has directed even that even in search and seizure relating to house hold jewellery not to treat the jewellery as unexplained if the weight of the jewellery found tallies with the weight disclosed by the assessee. It has been shown by the assessee that the assessee had sufficient stock of the stones as on the date of survey and further there was direct evidences of the purchase of the stones vide MS-4 page-34. Hence the stones found in the inventory the weight of which was 3015.980 Gms is explained. For the sake of repetition, it is again mentioned that the DVO has taken the market value and not the cost price and there was evidence of purchase of 2578 gms immediately within one month before the date of survey and there was stock of stones b/f from earlier period, the weight of stones found at the time of survey was covered of the stock in hand as